Canada-Mexico: Manufacturing a Mutually Beneficial Partnership

Commentary by JP McDaris

A recent article in 20/20, the Canadian Manufacturers & Exporters’ (CME) magazine, led with some eye-opening statistics about Canada and Mexico:

  • With an increase of 740% in bilateral trade since 1993, Mexico is today Canada’s third largest bilateral trading partner, accounting for more than US$32 billion in 2013.
  • Between 1999 and June 2014, Canada has invested almost US$20 billion in Mexico.
  • Mexico is identified by 30% of Canadian manufacturers and exporters as a country for growth in the next five years, according to a recent CME study.
  • Mexico is Canada’s fifth-biggest export market, after the US, China, UK and Japan. Since NAFTA was passed, Canadian exports to Mexico have increased eight-fold, reaching $9.8 billion in 2013.
  • Mexico is Canada’s third-biggest import supplier worldwide, only behind the US and China, with annual sales of US$25.9 billion, exceeding sales sourced from Germany and UK combined ($US 23 billion).

Twenty years after NAFTA’s implementation, Mexico and Canada have both benefited from the economic union by making each country more attractive for doing business, as well as more competitive.

Further, figures like these demonstrate that Mexico is a rich land of opportunity for Canadian companies seeking growth within a NAFTA framework, as well as entry into other new markets. Mexico’s free trade agreements with 44 nations, more than any other country on earth, means that by establishing a footprint in Mexico, Canadian OEMs, suppliers and providers of all size have zero- or low-tariff trade opportunities in Europe, South America and even Asia. That said, only companies physically producing in Mexico are able to take advantage of the benefits of all of Mexico’s free trade agreements.

What if North America is the only market on your radar? Mexico still brings the benefit of readily available skilled labor, very low operating costs (on a par with wages in China, according to the Boston Consulting Group), and new business opportunities to supply OEMs focusing on North America.

How can smaller providers leverage Mexico’s strengths?

All these statistics are interesting in the aggregate. But if you are a company manufacturing for export in Canada, how do you all of a sudden gain entry into Mexico in order to leverage these growth opportunities? How can smaller firms, that lack the in-house knowledge and/or resources to make a multi-million dollar investment in Mexico, establish production there?

The answer lies in finding an experienced partner who knows the country well and has a program to mitigate the risks. One Canadian auto supplier did just that, in partnering with Entrada Group.

Source: 20/20 magazine

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